From BlenderWiki

Blender provides a set of materials which do not obey the face-shader paradigm and which are applied on a per-vertex rather than on a per-face basis. These are called Halos because you can see them, but they do not have any substance. They are like little clouds of light; although they are not really lights because they do not cast light into the scene like a lamp.

Halo Materials

Halos come in very handy when creating certain special effects, when making an object glow, or when creating a viewable light or fog/atmospherics around an actual light.

Options

Press F5 to display the Material buttons, and then press
the Halo button on the Links and Pipeline Panel.
The Material and Shaders panels change as shown below in Halo buttons.

Halo buttons

As you will see in the 3D View, the Mesh faces are no longer rendered. Instead just the vertex is rendered, since that is where each halo will originate. Halos can be hard to find in a crowded scene, so name it well for easy location in the outliner.

In the Material Panel, you now set three colors which, in standard material were
Diffuse, Specular and Mirror colors are now relative to three different Halo
characteristics:

Halo

the color of the halo itself,

Line

the color of any possible line you might want to add

Ring

the color of any possible ring around the halo

You can not use color ramps. Lines, Rings and an assortment of special effects are available with the relevant toggle buttons, which include Flare, Rings, Lines, Star, Halotex, HaloPuno, X Alpha, and Shaded. Halo Variations shows the result of applying a halo material to a single vertex mesh.

Halo Variations

The halo size, hardness and alpha can be adjusted with the pertinent sliders. These are very similar to traditional material settings.

The Add slider determine how much the halo colors are 'added to', rather than mixed with, the colors of the objects behind and together with other halos. By increasing Add, the Halo will appear to light up objects that move behind it or through the Halo field.

To set the number of rings, lines, and star points independently, once they are enabled with the relative Toggle Button,
use the Num Buttons Rings:, Lines: and Star:. Rings and lines are randomly placed and oriented, to change their pattern you can change the Seed: Num Button which sets the random numbers generator seed.

Halo Texturing

By default, textures are applied to objects with Object coordinates and reflects on the halos by affecting their color, as a whole, on the basis of the color of the vertex originating the halo. To have the texture take effect within the halo, and hence to have it with varying colors or transparencies press the HaloTex button; this will map the whole texture to every halo.

This technique proves very useful when you want to create a realistic rain effect using particle systems, or similar.

Another Option is Shaded. When shaded is enabled, the Halo will be affect by local light; a lamp will make it brighter and affect its diffuse color and intensity.

Examples

Dotmatrix display

Let's use a halo material to create a dotmatrix display.

To begin, add a grid with the dimensions 32x16. Then add a camera and adjust your scene so that you have a nice view of the billboard.

Use a 2D image program to create some red text on a black background, using a simple and bold font (if you are a lazy lizard [I hope this not offensive, I just like how it sounds!], you can just save the picture below on your hard drive…). Dot matrix image texture. shows an image 512 pixels wide by 64 pixels high, with some black space at both sides.

Dot matrix image texture.

Add a material for the billboard, and set it to the type Halo. Set the HaloSize to 0.06 and when you render the scene you should see a grid of white spots.

Add a Texture, then change to the Texture Buttons and make it an image texture. When you load your picture and render again you should see some red tinted dots in the grid.

Return to the Material Buttons and adjust the sizeX parameter to about 0.5 then render again; the text should now be centered on the Billboard.

To remove the white dots, adjust the material color to a dark red and render. You should now have only red dots, but the billboard is still too dark. To fix this enter EditMode for the board and copy all vertices using the ⇧ ShiftD shortcut (take care not to move them!). Then adjust the brightness with the Add value in the MaterialButtons.

Dot Matrix display.

You can now animate the texture to move over the billboard, using the ofsX value in the Texture panel of the MaterialButtons. (You could use a higher resolution for the grid, but if you do you will have to adjust the size of the halos by shrinking them, or they will overlap. (Dot Matrix display).

Note about material indices

Halo materials only work when applied using the first material index. Any material(s) in a subsequent material index will not be rendered.

Lens Flares

Our eyes have been trained to believe that an image is real if it shows
artifacts that result from the mechanical process of photography.
Motion blur,
Depth of Field, and lens flares
are just three
examples of these artifacts. The first two are discussed in the
chapter_rendering; the latter can be produced with
special halos.
A simulated lens flare tells the viewer that the image was created with a
camera, which makes the viewer think that it is authentic.

Lens Flare settings

We create lens flares in Blender from a mesh object using first the Halo button and then the [ Flare options in the Shaders Panel of the material settings. Try turning on Rings and Lines, but keep the colors for these settings
fairly subtle. Play with the Flares: number and Fl.seed: settings until you arrive at something that is pleasing to the eye. You might need to play with FlareBoost: for a stronger effect (Lens Flare settings).

Note that this tool does not simulate the physics of photons travelling through a glass lens; it's just a eye candy.